Stubborn CPI knocks appetite from NZD

10.53 NZST, Wednesday 17 October 2012

Stubborn CPI knocks appetite from NZD

By Andrew May (Sales Trader, CMC Markets New Zealand)

New Zealand witnessed its poorest CPI figure since the late 90's yesterday perhaps sending vehement signals to the Reserve Bank of New Zealand of an impending rate cut to kick start economic traction. 0.3% for the quarter and 0.8% for the year dishevelled expectations by 0.2% across the table. The Kiwi US cross came under immense selling pressure as a consequence and dropped 35pts to 0.8150 before pressurised lower in late trade to 0.8110.

The Euro and Aussie crosses were the worst performers from their respective early week highs. NZDEUR down 83pts 0.6237c and Aussie sold 62pts currently treading 0.7920.

Quite the stark contrast considering the plethora of buoyancy the markets received last night. The DOW was up 0.8% pushing stocks 16% higher for the year (7% off their 2007 peak) as core CPI targeted a 2% bulls eye and US factory output expanded 0.4% over September. Across the Atlantic, a promising resurgence for the inevitable Spanish bailout was inching closer alongside growing German investor (ZEW) sentiment.

The Kiwi's risk appetite and investor attraction usually follows in quick succession with offshore trade, however not as we'd hoped for. The NZDUSD had a slight reprieve looming under 81c finding a 0.8135 support but looks to heavily test 0.8050-8120 over the forthcoming week as investors tread with caution over the Chinese GDP late this week followed by incoming Reserve Bank Governor Graham Wheeler's first OCR review for next Thursday.
ends

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